This is the same company that said we had to live with the fact that there was a new paradigm and no amount of complaining by the public would make it change course…

And here we are. Today’s announcement that the XBONE has removed nearly every single DRM function from their system. There is but a fraction of a degree between what they’ve done and a true 180. To summarize:

No need to be always online

You DO need to be online to register the game initially

No check-ins every 24 hours

Discs work similar to the 360, in that they need to be in the console to play

Downloaded games work offline or off

You can rent, trade, exchange games as you do today

Works in all regions (AUS games in US)

What are you exchanging for this? The ability to play games wholely from the cloud, meaning you didn’t need a disc in the console.

So after taking what by most accounts is the most massive pounding in gaming history, completing denying reality, telling gamers to basically smeg-off, flipping the bird to the used game industry (GameFly & Gamestop), losing a VP for trying to push always online and still selling games for the same price as the PS4 they decided to turn tail.

Can you imagine being inside the Microsoft offices the past few weeks? It must have been like a madhouse of scrambling from a PR side, trying to spin the “future” of gaming. Even Major Nelson had a hell of a time trying to pitch it.

Still, this is good for Microsoft. With ~4 months to go, they’ve removed a massive barrier to sales. Sure, you still have a camera that’s always one. Sure you still need to have internet access to initially launch a game. Sure, it’s still $100 more than the PS4.

Like this:

By the end of this calendar year, all the new consoles will be on the market. The 2013 holidays will see the “hardcore” gamers buy either a PS4 or XBone. True market penetration won’t really occur until the fall of 2014. It’s cyclical, happens with most any product. I would hedge my bet on a particular brand but that doesn’t really matter much for this topic.

What does matter is the cost structure of said consoles and games. Microsoft has stated that their first-party games will be $60. Sony has said the same. I’m disappointed in the former since one of the main draws is the reduction in pirating/used game sales, therefore companies should be making a lot more money. You’d think the prices would be lower. It’s a bit more expensive than today’s games and the dev costs should be lower since the architecture between PC, PS4 and XBone are near identical. Game prices are part 1 of the problem.

Free to Play (buy to play, freemium, cash stops) is a still relatively new financial model that no one really has a good grasp on. A company can get 1-2 years tops out of a cash stop before devolving into lockboxes. There comes a point where there is simply nothing left to buy and the company still needs money to operate. There are more games that fail this particular step than succeed (waiting on Marvel Heroes to discuss this point). Part 2 of the problem.

DLC is bleeding between the line between core play, additional content and value. Gone are the days of horse armor but here are the days of Protheans. While Skyrim DLC can prove to add value to the entire game, the prevelance of in-media-res DLC (like Deus Ex) is disturbing. Entire chunks of the game are missing. Part 3 of the problem.

Micro/macro-transactions have yet to find a floor or ceiling. LOTRO horses, EvE monocles, sparkle-ponies are in a class of their own. Paying for crafting material in Dead Space 3, or simply having a cash stop button on every screen, regardless of the underlying payment model, is garish. Paying for XBox Live and still getting ads is ridiculous. Part 4 of the problem.

Disconnect with the core audience. Back in the day, the core audience was 18 year olds sitting in a basement. They still exist but the core spenders are older, those with more disposable income yet conversely less time. An older person has a better understanding of value for service yet there is a growing divide between AAA developers and consumers. Ni No Kuni, Tomb Raider, BioShock and The Last of Us are supreme examples of quality and sold extremely well. Gears of War and God of War are cash grabs that are bleeding companies. Part 5 of the problem.

Independent developers are the future. It’s not a question anymore, it’s simple reality. They cost structures are lower, they aren’t jaded, they target their games to a specific market and have lowered expectations. The gate to entry is small (especially on PS) but the market itself is becoming saturated. This makes it hard for a new indie game to reach the spotlight, outside of word of mouth. Part 6.

A crash occurs when a bubble bursts. A bubble occurs when reality is artificially inflated up to expectations, in order to turn a profit. Gaming today seems to be heading farther and farther away from reality and more into slide decks for quarterly reports. Looking from the outside, it seems more like a head scratching exercise of “did they really think that would work?” The market is heavily saturated with the same product on every corner, with less features and more cost per iteration. There are only so many SWTORs that can launch and fail before bankrupting a company (see THQ). You can’t spend $100 million to develop a game that sells 100K copies or only provides income for 3 months.

The gaming paradigm that exists today is doomed for failure as it is simply not sustainable. There’s no one single problem to fix, it’s a plethora of systematic failures driven by a core concept – getting more money out of gamer’s pockets. We’re nearing the edge and it’s a hell of a fall on the other side.

Like this:

Did you know that America’s Funniest Home Videos (or AMV now) is the longest running reality TV show? I think it has to do with the idea that you know something is going to happen but you want to see it anyways. I mean, who doesn’t want to see more of “ball hits crotch”? You know half the episode is going to have that but you still watch it. It’s a comedy of errors really.

I feel like Microsoft is in the same boat. How many years now have companies tried to put in draconian DRM into media? Remember when Sony put rootkits into their CDs? Ubisoft gave up on the “always on cloud” DRM when the servers simply could not handle it. SimCity had probably the most disastrous launch in gaming history, enough to lose a CEO. Even the lead up to the XBONE reveal had it’s share of PR problems. I don’t understand how a multi-billion dollar company did not think that they were going to have a problem on their hands. Every single sign, every single trend said that they were heading into a storm.

And when the big reveal came about, they didn’t have detailed answers for a completely new way of operating. I mean, you know you’re going to cause a heck of a storm in PR. You’re going to break some companies’ business models (Gamestop). You are surely going to light a massive fire in the pits of gaming. And your answer is 2 weeks of silence? Maybe they were hoping Sony would come onboard, then it would have put the ball in their court.

I mean, I get the want to move outside gaming. There are more people who watch TV (streaming or not) than there are who play games. The price point for that market is around $100 right now, not $500. The only people willing to pay that price are the hardcore gamers, you know, the niche of gamers who have been royally ticked off since the initial reveal?

I get questions about why Steam is excluded from this discussion, given that you can’t trade games. There are a few reasons for this and foremost is that Steam provides a service while Microsoft provides a platform. I can play Steam offline for a trip to the cottage. I can install the game on another computer a near unlimited amount of times. It has access to many more games. Prices on said games reach astronomically low prices. Every single choice Steam has made has been with the consumer in mind. Consumers, in turn, have accepted the service terms because it meets their needs.

Sony seems to have won E3 but there are many months to go before system launch. The irony is that Sony didn’t do anything different than what they did in the past. How do you get accolades for offering vanilla ice cream? I expect that Microsoft HQ is going to go into silent mode for the next few weeks and re-jig their PR plan. This cannot have gone anywhere close to what they had expected, even though every sign I could read said it turned out exactly like expected.

I think this past month will be reviewed for years to come in marketing classes and the lessons learned will have a major impact in all future technology launches. There are simply too many gaffes and gaps in logic to not merit further scrutiny.

Sony had a pretty damn good presentation. Backwards compatibility (sort of), decent amount of games, $399 too. Oh, and you can share games and in 3 years when you want to play an old game (like I played FF10 a few weeks back) you’ll be able to, without the crazy DRM XBONE has.

I’m not pointing at a winner or loser here. That will happen a year after launch of these consoles. Considering that E3 is meant to showcase games for gamers though… I think there’s a clear advantage to Sony now. Do I think that Microsoft will go back on their earlier points of online requirements, Kinect and all that crud? Not really, as it would require a rather LARGE change to their architecture.

I think the first day of E3 was like a cannon shot across the bow of gaming from two massive companies. The next few months leading up to the holidays are going to be quite interesting.